The Coalition has announced plans to introduce the new flat rate state pension earlier than previously proposed, in a move to address the issue of approximately 80,000 women who were born between April 6th and July 5th in 1953 missing out on the new £144 a week pension.
The Chancellor appeared on the BBC’s Andrew Marr Show at the weekend to announce his decision that the new state pension will now come into effect a year before planned, in 2016.
Head of pension research at the finance company Hargreaves Lansdown, Tom McPhail, said: “This will be welcome news for the tens of thousands of women who would have missed out on the higher state pension as a result of reaching their state pension age just months before the introduction of the new terms.”
He went on to say that there will be some negative consequences of the announcement as many final salary pension schemes will now see adjustment to their pension terms 12 months earlier.
Pension providers have warned that bringing the new flat rate state pension in a year earlier could help speed up the rate of final salary pensions disappearing, as the new state pension will be financed by not allowing people to contract out of the Government system. This will lead to both companies and employees with workplace pensions having to pay more in National Insurance contributions.
Businesses had been told back in January that none of the proposed reforms would be put into effect until at least 2017, to give them enough time to prepare members for the changes.
In other news for pensioners, the proposed cap on care costs which was scheduled to be introduced in 2017 at a threshold of £75,000 has also been brought forward a year, although at a slightly reduced cap of £72,000.
George Osborne commented that the decision would help protect vulnerable elderly people from having to sell their properties to fund any social care costs they might need in later life.
He explained that those needing social care would have to fund their own care bills up to £72,000, but any costs incurred after this threshold would be met by local authorities.
Whilst most people welcome the cap as recommended by the Dilnot report, many feel that the cap doesn’t go far enough to safeguard people’s homes.
Liz Kendall, the shadow minister for care and older people, said: “George Osborne is still failing older people and their families. Today’s minor adjustments to the government’s plan will still leave far too many selling their homes to pay for care.”